Faced with tough markets, Robert Alster, chief investment officer at Close Brothers Asset Management discusses with WealthBriefing where opportunities lie for investors.
Robert Alster at Close Brothers Asset Management highlighted in London this month the difficult market situation for nearly all asset classes, and pinpointed where glimmers of opportunity lie.
Speaking exclusively to WealthBriefing, Alster said that markets were tough right now for virtually all asset classes. “The only ones today that are up are UK large cap equities, global infrastructure and commodities. That’s about it and everyone’s portfolio can’t be focused on them,” he said.
“From an investor's point of view, we actually want things to deteriorate quickly, as out of every crisis comes an opportunity. We can get things cheaply,” he continued.
“Increased yields in fixed income are providing a glimmer of opportunity for bonds. They look interesting for the first time in six years,” he said.
“Defensive sectors and consumer staples have done well and they should continue to outperform. Everyone needs their shampoo, for instance, regardless of the economy. Utilities have been benefiting from the higher energy prices. But the hospitality sector doesn’t look so good as people don’t have to go out for that meal,” he added.
“We still have some tech stocks and at some point their valuations will come back. We invest in big software companies like Microsoft and those involved in cloud computing. We’re also investing more in renewables,” he said.
“We’re underweight in equities and fixed income, although fixed income has warmed up slightly. We’re overweight in alternatives. We’re invested in the US and UK and we’re also looking at Japanese equities,” he continued.
“We stay underweight in Europe due to the energy crisis and we’re more cautious about investing in China due to it’s stringent Covid restrictions. It also lags a long way behind in corporate governance,” he said. “We would need to see a lot of progress there to invest in the country, although it’s obviously a big player and we’re watching it closely,” he added.
He highlighted how alternatives have taken off hugely in recent years, due to the inflation protection they offer, higher yields, the renewable push and student housing. “It’s very research intensive but the chances are there will be a move out of alternatives at some point,” he added.
The firm does not invest in bitcoin or cryptocurrencies. “We did a lot of work on them a while back. We couldn’t value them like we do for company shares so we don’t invest in them,” he said.
Explaining the firm’s investment style, he said it is growth at reasonable prices. “We don’t look at high-risk firms. We have a growth tilt to our investments. We are research-based. We add value to three areas: asset allocation, portfolio construction, security search where analysts look at equities, fixed income and so on. We have a very decentralised approach,” he added.
“We also have a team specialising in ESG and we are doing more there. A lot of high net worth individuals, especially the charity business, the younger generation and women, are very keen on it. We will start having to get an ESG client profile. We’re investing more in renewables like solar and wind,” he continued.
“There is a lot of regulation in the pipeline that UK investors will have to think about. The Financial Conduct Authority in December and probably now more likely in the New Year will publish a taxonomy which will dictate whether you can call yourself a sustainable fund and that will be critical. There’s a lot happening,” he said.